Refinancing the FHA Adjustable Rate Mortgage Before Reset

May 1, 2019

Adjustable rate mortgages offer an introductory rate sometimes called a teaser rate that will expire at some point depending on the terms of your mortgage loan agreement. Borrowers who do not want to experience an interest rate adjustment on their ARM loans have the option to refinance the mortgage and escape the ARM loan reset.

How Adjustable Rate Mortgage Loans Work When It’s Time to Refinance

As mentioned above, your ARM loan will adjust periodically depending on the loan agreement. Borrowers may find that the current mortgage loan interest rate adjustment isn’t acceptable and seek to refinance out of the current loan to avoid the rate change.

That’s when the FHA home loan refinance option comes in. You may wish to refinance out of an ARM loan and into a fixed-rate mortgage. This is definitely possible for borrowers who wish to do so even if they do not have an existing FHA mortgage.

You read that correctly, you can refinance out of your current ARM loan and get into a low-rate FHA mortgage loan as a fixed rate mortgage. Borrowers also have the option to refinance out of one ARM loan and into a new one.

A Special FHA Refinance Loan Option for Those With Current FHA Mortgages

FHA loan rules have special provisions for borrowers who wish to refinance an existing FHA mortgage including ARM loans; you can apply for an FHA Streamline Refinance mortgage loan that requires a tangible benefit to the borrower as a result of the transaction.

Those tangible benefits can include a lower mortgage loan rate, lower mortgage payments, or the switch from an Adjustable Rate Mortgage to a fixed-rate loan.

Only FHA loans are eligible for FHA Streamline Refinancing, which has no FHA-required credit check or appraisal in most cases. Your original FHA loan application data is used to qualify you for the new mortgage.

You will need to discuss your needs with a participating lender to see what is possible for a refinance loan but remember that you do not have to have an existing FHA mortgage to refinance your home with an FHA refinance loan.

FHA Refinance Loan Occupancy Rules

You also do not need to be a first-time homeowner to refinance with an FHA mortgage. You can apply for FHA refinancing for any home you wish as long as you will agree to be an owner/occupier and use the property as your primary residence.

At least one borrower obligated on the refinance loan must live in the property as her fulltime residence as a condition of FHA refinance loan approval.

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